Whispering Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts m be relevant to this analysis. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate Cost of old asset Book value of old asset Determine which amounts listed are relevant cash flows for Whispering Corp. as it considers this asset sale and replacement. Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated annual net operating cash inflows $11.100 $2,100 $2,100 $20,100 $2,100 5 years $3,000/year for 5 years NPV $ 8% 20% Irrelevant Relevant Irrelevant Relevant Relevant Relevant Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g. (5,125.36).) Click here to view the factor table
Whispering Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts m be relevant to this analysis. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate Cost of old asset Book value of old asset Determine which amounts listed are relevant cash flows for Whispering Corp. as it considers this asset sale and replacement. Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated annual net operating cash inflows $11.100 $2,100 $2,100 $20,100 $2,100 5 years $3,000/year for 5 years NPV $ 8% 20% Irrelevant Relevant Irrelevant Relevant Relevant Relevant Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g. (5,125.36).) Click here to view the factor table
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Whispering Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may
be relevant to this analysis.
Cost of old asset
Book value of old asset
Selling price of old asset
Purchase price of new replacement asset
Estimated salvage value of new asset
Estimated useful life of new asset
Estimated annual net operating cash inflows
Discount rate
Tax rate
Cost of old asset
Book value of old asset
Selling price of old asset
Determine which amounts listed are relevant cash flows for Whispering Corp. as it considers this asset sale and replacement.
Purchase price of new replacement asset
Estimated salvage value of new asset
Estimated annual net operating cash inflows
$11,100
$2,100
$2,100
$20,100
$2,100
Click here to view the factor table
5
years
$3,000 year for 5 years
NPV $
8%
20%
Irrelevant
Relevant
Irrelevant
Relevant
Relevant
Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2
decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g.
(5,125.36).)
Relevant](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F756650b3-18d1-4b86-ac9b-c71ad5c7bd76%2F07e9fadf-fb8f-44c6-ad41-2656bfa790b1%2Fortdxdg_processed.png&w=3840&q=75)
Transcribed Image Text:Whispering Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may
be relevant to this analysis.
Cost of old asset
Book value of old asset
Selling price of old asset
Purchase price of new replacement asset
Estimated salvage value of new asset
Estimated useful life of new asset
Estimated annual net operating cash inflows
Discount rate
Tax rate
Cost of old asset
Book value of old asset
Selling price of old asset
Determine which amounts listed are relevant cash flows for Whispering Corp. as it considers this asset sale and replacement.
Purchase price of new replacement asset
Estimated salvage value of new asset
Estimated annual net operating cash inflows
$11,100
$2,100
$2,100
$20,100
$2,100
Click here to view the factor table
5
years
$3,000 year for 5 years
NPV $
8%
20%
Irrelevant
Relevant
Irrelevant
Relevant
Relevant
Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2
decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g.
(5,125.36).)
Relevant
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